USA government posts widest deficit since 2012

Angelo Bowers |Tuesday, October 16, 2018

Deficit balloons to $779 billion in Trump’s second year

"The fact that our government is closing in on trillion-dollar deficits in the midst of an economic expansion should be a serious issue for voters and candidates", William Hoagland, its senior vice president, said of next month's USA congressional elections. Some Fed officials have warned that rising USA deficits could hamper any US fiscal response to a downturn.

Secretary of the Treasury Steve Mnuchin announced the shortfall Monday, but said that because of a combination of factors, the Treasury Department had predicted a budget deficit $70 billion higher.

The current fiscal year is likely to see an even larger deficit, potentially in excess of $1 trillion.

The government has also expanded military spending, though the Trump Administration has promised to pull back spending in other areas.

Trump frequently criticised Obama for running up the deficit, and in 2012 recommended banning lawmakers from re-election if Congress couldn't balance the budget.

The official deficit tally for fiscal 2018 marked a $113 billion increase from the previous year and accounted for 3.9 percent of gross domestic product, an increase of 0.4 percentage points.

The budget deficit has continued to climb in recent years, raising concerns the country's debt load of more than $21.5 trillion will grow out of control. In March, Trump signed a $1.3 trillion spending bill into law.

But with GDP expanding by 4.2 percent in the second quarter of the year, the White House is banking on faster growth to pay for December's tax cuts.

The approximately 17 percent jump in the federal deficit came despite the strong growth in the overall USA economy, an unusual instance in which the economy and the deficit are expanding at the same time.

"This year's deficit amounts to $6,200 per household and is more than we spend each year on Medicare or defense", Maya MacGuineas, the committee's president, said in a statement. But the economy was already in a strong recovery when Trump moved into the White House, and he still boosted the deficit.

"America's booming economy will create increased government revenues - an important step toward long-term fiscal sustainability", Office of Management and Budget Director Mick Mulvaney said in a statement accompanying the data. Another factor in the widening of the deficit was an increase in spending on the military.

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